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The Kay Review

Tue 02 Dec 2014

2nd BIS Progress Report publishes recommendations

On 27 October 2014 the Department of Business Innovation and Skills (BIS) published its second annual progress report on implementation of the recommendations contained in Professor Kay’s report into the UK Equity Markets and Long Term Decision Making (the Kay Review).

The review notes that a lot of progress has been made by the investment community, business groups and regulators in improving dialogue between companies and their investors and to improve accountability and transparency within the investment chain.

The review notes that a lot of progress has been made by the investment community, business groups and regulators in improving dialogue between companies and their investors and to improve accountability and transparency within the investment chain.

Whilst acknowledging good progress, the report recognises that further development is required in a number of areas including:

  • The FRC’s continued commitment to encourage and monitor signatories to the Stewardship code and the development of NAPF’s Stewardship Disclosure Framework will continue to promote commitment to the Stewardship code and clear choices on stewardship for pension funds and other investors. (Recommendations 1 and 2)
  • The Government (HMG) and other regulators to take forward the recommendations of the Law Commission following its review of fiduciary duties and in particular embedding within regulatory guidance the need for trustees and governance trustees to consider the long term factors within investment decisions. (recommendations 7 and 9)
  • HMG to consult on amending Occupational Pension Scheme (Investment) Regulations to require trustees of trust based pension schemes to state the scheme’s policy on stewardship.
  • HMG to continue its support for the development of the Investor Forum launched in July 2014. (recommendation 3) The review notes that the Investor Forum may provide a means for companies to consult major long term investors on significant board appointments. (recommendation 5)
  • BIS to consult senior stakeholders from business and investment industries on their views of progress to date on shareholder engagement and what steps HMG, FRC and industry can take to encourage better engagement and long term stewardship investing.
  • FCA to conduct a broad review of competition issues in the wholesale financial markets.
  • HMG remains focused on ensuring that executive remuneration is aligned with long term sustainable company performance.  (recommendation 15)
  • HMG will undertake further work to consider the effectiveness of the system for holding securities electronically and to investigate the most appropriate means for individual investors to hold shares directly on an electronic register. (Recommendation 17) Dematerialisation of the UK securities markets is required by 31 January 2025 and Equiniti is a key member of the industry working group looking at this.
  • BIS is currently inviting tenders for research to inform the development of this work through its Research and Evaluation Procurement Framework. This research will seek to improve BIS’s understanding of investors’ experiences of intermediated share ownership, and whether reform would be desirable.

For more information on this topic, please contact your relationship manager.

Ezine issue: December 2014